07 November 2012 11:17 [Source: ICIS news]
LONDON (ICIS)--European styrene prices are expected to soar following Shell Chemicals' declaration of force majeure on styrene at its Moerdijk site earlier this week, with firm benzene costs also supporting the bullishness, sources said on Wednesday.
While the November barge contract for styrene settled lower on softer demand and the arrival of imports – despite a €34/tonne ($44/tonne) increase for feedstock benzene this month – the sudden declaration of force majeure by Shell Chemicals saw November spot prices gain $75/tonne since the beginning of the week.
Deals for November were done at $1,525/tonne on Monday 5 November, and emerging speculation about technical problems at the Moerdijk site saw prices move up to $1,550/tonne by the end of the day.
On Tuesday 6 November, offers opened at $1,590/tonne and a deal was done at $1,570/tonne before confirmation from Shell regarding the force majeure, which was due to an unforeseen steam leakage in the styrene monomer (SM)/propylene oxide (PO) plant. November later traded at $1,580/tonne and $1,600/tonne.
Offers for November and December were at $1,620/tonne this morning, while January was already in contango, with offers at $1,630/tonne.
News of the force majeure was met with some aggressive bidding in the market, as players looked to quickly cover short positions.
“November had less imports into Europe because everyone thought demand was off this month,” one styrene trader said. “Tanks are low, so when Shell starts buying December cargo to cover from traders it leaves less about, so we could see some real fireworks.”
Continued bullishness for benzene this month, where prices have moved back above $1,400/tonne on continued pyrolisis gasoline (pygas) restrictions keeping production limited, will also lead to some further anxiety in the styrene market.
“On benzene, the mind boggles,” said one source this morning. “It must be the lack of feedstock.”
Strong benzene prices mean that many producers have been selling benzene as opposed to utilising it for styrene production, and simply covering needs on the spot market.
November benzene was valued at $1,425-1,440/tonne this morning, meaning the margin between the two is now hovering around $180/tonne – well below profitability.
“Styrene will go crazy if this holds, because all the producers will have to buy it rather than produce it," one trader said.
($1 = €0.78)
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